MTD IT: What Does Quarterly Reporting Actually Involve?

A key part of complying with Making Tax Digital for Income Tax (MTD IT) is reporting your qualifying income and expenses to HMRC every quarter. The TaxNav team answers some frequently asked questions.

HMRC’s Making Tax Digital for Income Tax (MTD IT) came into effect in April 2026 and will eventually replace Self Assessment for millions of people. It affects different people at different times, depending on what they earn through self-employment or property rental income.

It might sound like routine tax admin, but MTD IT is a significant shift. The earlier you understand what’s involved, the better prepared you’ll be to manage the transition smoothly — and avoid penalties.

What is Making Tax Digital for Income Tax (MTD IT)?

MTD IT is part of HMRC’s wider strategy to modernise the UK tax system, making tax administration more efficient, accurate and easier for individuals and businesses.

Under MTD IT, you’ll use MTD-recognised software to:

• Keep digital records of your trade and property income and expenses
• Send updates four times a year of your year-to-date trade and property income and expenses to HMRC
• Submit a final declaration at the end of the tax year, including personal items such as your pension

It replaces the annual Self Assessment return with more frequent reporting designed to reduce errors and give you a clearer picture of your tax position throughout the year.

What are the benefits for sole traders?

MTD IT isn’t just about meeting new rules — HMRC hopes it will help you manage your business finances more easily. Key benefits for sole traders include:

• A clearer view of your tax position — with year-to-date updates four times a year, you’ll know how much tax you owe throughout the year, not just at the end.
• Fewer surprises — regular reporting makes it easier to budget and plan ahead.
• Less to do at year-end — keeping records up to date as you go avoids the last-minute scramble of sorting paperwork.
• Reduced errors — compatible software cuts down on mistakes, missed claims and manual inputting.
• Better control of your finances — many people find digital record-keeping helps them stay organised and make quicker decisions.

Over time, MTD IT can help you feel more in control and confident when managing tax, giving you more time to focus on your work and customers.

Who will be affected and when?

The new rules came into effect in April 2026 and initially apply to self-employed individuals and/or those with property rental income whose combined gross income from these sources exceeds £50,000 a year.

That covers sole traders across many sectors — from the building trade and property owners to psychiatrists, physiotherapists, product makers, personal coaches, consultants, IT contractors and those providing outsourced services like HR, marketing or finance. If you’re self-employed and earning above the threshold, the rules apply to you.

The rollout is phased:

• April 2026 — MTD IT became mandatory for individuals earning over £50,000 from self-employment and/or property rental income
• April 2027 — the threshold lowers to £30,000
• April 2028 — the threshold is expected to drop to £20,000

What you’ll need to do to comply

Once you’re within the scope of MTD IT, you’ll need to adjust how you manage and report your income tax.

You must use MTD IT-recognised software to keep digital records of your income and expenses. The same software sends updates to HMRC four times a year, summarising your cumulative year-to-date business income and costs.

At the end of the tax year, you’ll make any adjustments or relief claims, then submit a final declaration by the following 31 January to confirm your total tax liability. These steps replace the traditional Self Assessment process — more regular, but potentially more manageable if your records are kept up to date.

How to prepare

If you haven’t started yet, don’t panic. Get these basics in place and the rest follows naturally:

• Confirm whether your gross income will trigger the MTD IT rules using HMRC’s page
• Register with HMRC for MTD IT before you begin
• Select your software — TaxNav offers a 30-day free trial
• Start keeping and recording your digital records — directly into our software or in a spreadsheet using our bridging software. Until your final return, this does not need to be 100% accurate.
• Diarise when you need to submit your quarterly updates — TaxNav will remind you
• Diarise your final (annual) declaration deadline

People with income over £30,000 from self-employment and/or property will need to join MTD IT from April 2027. You can, however, volunteer to join early and get familiar with it before your HMRC deadline.

How TaxNav can help

At TaxNav, we’re already working with self-employed people across many professions to help them get ready for MTD IT. We were part of HMRC’s MTD IT pilot throughout the 2025/6 tax year and gained extensive experience through the 600+ live submissions we successfully completed.

Our MTD IT-recognised software offers:

• Digital record-keeping from your phone or laptop
• The ability to retain your preferred spreadsheets and still comply with MTD IT
• The updates to HMRC required four times a year, along with the annual declaration
• Reminders and prompts to help you avoid penalties from HMRC
• Expert support if you get stuck

There’s a 30-day free trial, and subscriptions run to £60+VAT a year, or £6+VAT per month pay-as-you-go.

Whether you’re tech-savvy or not, TaxNav aims to make MTD IT a little simpler to stay on top of.